CORRECT: ANZ Bank was most aggressive in rural rate swaps sales to farmers, ComCom says
(Clarifies Berry's view on later claims in 12th graph, adds quote in final graph)
By Paul McBeth
May 7 (BusinessDesk) - ANZ Bank New Zealand, the country's biggest lender, was the most aggressive in pitching interest rate swaps to farmers, over which it subsequently agreed to pay $19 million in compensation, the Commerce Commission says.
General counsel competition Mary Anne Borrowdale told Parliament's primary production select committee that of the three banks to settle with the regulator, ANZ had the most customers involved and was investigated over both the way it was able to move its margin and the break fees it charged farmers for an early release. While ANZ announced its settlement with the regulator before ASB Bank and Westpac Banking Corp, it only just made its offer to farmers yesterday. The three banks' collective settlements totalled $24.2 million.
"There were differences in the misleading representations for a start because ANZ's case was both about the ability to move the margin and about what break fees would be if you wanted to get out early," Borrowdale said.
"Westpac's case was just about the margin because their break fee was comparable as between the swap and a fixed rate loan, and ASB, when it apprehended there was a problem with its margin representation, chose not to move margins for the original term of the loan - so there was a smaller scale of issues there, which is why you see a smaller settlement amount and fewer complaints."
Chairman Mark Berry defended the commission's decision to settle with the lenders in the face of trenchant criticism from Labour Party primary industries spokesman Damien O'Connor, saying the deal ensured the 256 farmers who made complaints were assured of compensation, and wouldn't get dragged through the courts for another three to five years.
He defended the regulator's record of taking court action against large corporates, citing cases against the major trading banks, Air New Zealand, Carter Holt Harvey, Telecom Corp and Qantas Airways.
"This was a better, quicker, and more certain outcome for farmers," Berry said.
Borrowdale said the commission "expected some customers would fail to prove their case at court, others the court would probably have reduced their recovery for contributory fault because in some cases there will have been advice taken."
If farmers were unhappy with the settlement offer they received, there was a process for them to query that.
Several thousand farmers elected to use the interest rate swaps to take out loans worth more than $8 billion, and those customers who complained to the commission amounted to between 10 percent and 15 percent of the total number, Berry said. Some farmers had made their own settlements with the banks, something Labour's O'Connor said was often under duress and contained confidentiality agreements in doing so.
While the commission couldn't take a case for any farmers who now come forward because its investigation was closed, Berry said he would expect the banks to offer similar compensation to complainants.
"I’d repeat our prediction that a lot of customers are likely to go to the bank and say 'we didn’t complain but we expect to be treated the same as your other rural customers'," Berry said. "I can’t say how the banks would’ve responded to that, but I would hazard a guess that some sort of accommodation had been made."